Monday, December 29, 2008

Gas prices reached a new 2008 low of $1.61 per gallon, which is the lowest inflation-adjusted price since March 2002 (using EIA data), as real gas prices approach a 7-year low. From the $4.12 per gallon peak in July, American consumers and businesses are now saving $357 billion on an annual basis from the cost savings of lower gas prices, or almost $1 billion per day.

There will always be misperceptions about the U.S. economy. Nonetheless, over time, I'm sure more Americans will realize how great the U.S. economy was in the 2000s (when both the production and consumption sides are fully understood).

Unfortunately, most Americans don't understand the implications of Obama's projected economic policies. The U.S. could afford to be grossly inefficient from the end of WWII to the 1970s, because the world's major economies had to rebuild.

However, U.S. policies of anti-capital/business and pro-labor/poor, rejecting supply side economics, an even more progressive tax system, government creation of 3 million jobs, a small "middle class" tax cut, a slow, inefficient, and unfair stimulus plan, etc. may create more harm than good. There are many ways to raise taxes on capital and business and redistribute that income and wealth to labor and the poor:

Middle-Class Tax Cut On Track, Obama SaysDec. 28, 2008

"We feel it's important that middle-class people get some relief now," Obama adviser David Axelrod said.

The incoming administration is considering tax cuts of $1,000 for couples and $500 for individuals that will be delivered by reducing the tax withheld from paychecks. That plan has been estimated to cost about $140 billion over 2009-2010.

He placed the cost of a planned Obama stimulus package at "$675 billion to $775 billion" but said "those numbers are not fixed."

The slowing economy also means that it's more important than ever to eliminate President George W. Bush's tax cuts, Axelrod said. "It's something we plainly can't afford moving forward," he said. "Whether it expires or we repeal it a little bit early we'll determine later but it's going to go. It has to go."

"It'll just restore some balance," said Axelrod, saying the two moves will equal a "net tax cut for the American people."

Axelrod also said Obama wants to create as many as 3 million jobs for work-starved Americans, but wants those jobs to be in areas that will help the nation's economy in the future. Obama's staff has talked about "creating or saving" millions of jobs with his economic program.